Tuesday, May 24, 2011

(1) China is now on an all-out campaign to build up its military. (2) China wants the renminbi to backed with a huge percentage of gold, thereby making the renminbi the world's best and most trusted currency. To compete, I believe that somewhere head the US will have to back its current irredeemable fiat currency with gold. In order to do that, the US will have to boost the price of its huge gold hoard to a level where the dollar may be backed anywhere from 50% to 100% with gold. That could mean unilaterally raising the price of gold to maybe $5000 and ounce or more...I thought that gold, closing higher, in the face of the stronger dollar, was significant. Gold appears to be advancing against almost all fiat currencies...

Points 1 and 2 above are not new to me. I've believed all along that China wants to ultimately reinstate a gold/silver-backed currency. They will need #1 in order to accomplish that. In order to accomplish a suitable backing, the price of gold/silver will have to revalued by several multiples from where it is here. It will be interesting to see if China forces the U.S. to provide full-accounting in public of its gold holdings. Again #1 above is a requisite to pull that off.

$5,000 is a number that seems to have been "popularized" by the widely publicized Jim Rickards. I believe Rickards is either low (gold target) or wrong (view that Fed won't continue QE) on many of his views. Frankly, I believe $5,000 is too low. Although I refuse to disclose my view on the ultimate target for gold - for the reason that I don't want to face the same vehement, self-righteous indignation that I faced back in the early 2000's when I said housing would collapse - I believe that $5,000 could be low by at least a couple multiples.

Of course, by the time all the events take place that would drive to gold to where I think it can go, we may be fully embroiled in in WW3 (see RR's #1 above) or life will be unbearably miserably and democracy-free in this country...

FOFOA recently hinted at $60,000 (maybe an inflation adjusted price since his original was from somewhere around 2009 I belive). Still, although he might have the highest 'target' his essays seem to be the most convincing and eloquent discussion of gold on the web.

Maybe you or another poster here can answer the following question. If a person has gold and/or silver in GoldMoney.com, which is an overseas company, is that person subject to the precious metals 28% capital gains tax if they cash out at a profit? The gold/silver is either held in London, Zurich, or Hong Kong.

Oh how fickle the scum bag ruling elite are....when the Hunt's needed silver col lateralization it was a no go,,,,AND NOW WE HAVE GOLD....

The European Gold Confiscation Scheme Unfolds: European Parliament Approves Use Of Gold As Collateral

Wonder why Europe is pressing so hard for Greece (and soon the other PIIGS) to collateralize its pre-petition loans on a Debtor in Possession basis? Here is your answer: "Yesterday’s unanimous agreement by the European Parliament’s Committee on Economic and Monetary Affairs (ECON) to allow central counterparties to accept gold as collateral, under the European Market Infrastructure Regulation (EMIR), is further recognition of gold’s growing relevance as a high quality liquid asset. This vote reinforces market demand for a greater choice of assets that can be used as collateral to meet margin liabilities." Luckily for Greece, it has 111.5 tons of gold in storage (somewhere at the New York Fed most likely). Looking down the road, Portugal has 382.5 tons, Spain 281.6, and Italy leads the pack with 2,451.8 tons.

"Welfare state democracy is incompatible with sound money, in our opinion. As just one example, we refer to a recent research study flagged by Pimco: 'The Liquidation of Government Debt,' by Carmen Reinhart and M. Belen Sbrancia. It concludes that 'the annual liquidation of debt via negative real interest rates amounted on average to 3% or 4% of GDP per year ... which quickly accumulated (without compounding) to 30% to 40% of GDP debt reduction in the course of a decade.'

"In other words, an essential mechanism for servicing sovereign debt has been the devaluation of investor claims by capping interest rates. That amounts to outright theft of wealth by government from its citizens and more recently non-U.S. investors.

"Negative real interest rates, less obvious than CPI inflation, are the stealthy pillar of welfare state finance. Gold prices correlate inversely with real interest rates, as we have been suggesting for the past decade. This relationship is one of the most reliable indicators of the macro climate for gold. Negative real rates ought to be a flashing green light for capital to seek out gold."

Eric Arthur Blair aka George Orwell

"Hope" is not a valid investment strategy

Full Time Jobs Over Last 5 Years

Is Your Gold Missing?

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Epic Quote - "Jesse" Sent This To Me

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title." - Anonymous

The Basic Fundamental Problem

What's the solution?

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”

Ludwig von Mises – Austrian Economist (1881- 1973)

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie? JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

Priceless Quote From Richard Russell

On Larry Summers: This doofus practically ruined Harvard when he headed it. I can't think of a worse choice to be chief economic advisor. I wouldn't trust Summers to manage a Starbucks franchise.

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.

Quote of the Month

And very relevant in the context of yesterday's post about gold moving higher against all fiat currencies:

Just imagine what would happen if a mere ten percent of the money currently going into bonds were instead to go into gold. As in 1972, the real move has yet to begin.

- Murray Pollit, Pollit & Co.

A Picture Says It All...

www.moneyandmarkets.com

Golden ore samples produced by Eurasian Minerals

Undisclosed exploration site

The Next Reserve Currency?

1 oz. Chinese Panda

Guess who said this?

Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies...What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.

-Alan Greenspan, 9 Sep 2009

THIS is what REAL money looks like

1 oz. Gold Eagles

Alan Greenspan said what?

“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

From "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan

About Me

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance.
Currently I co-manage a precious metals and mining stock investment fund in Denver.
My goal is to help people understand and analyze what is really going on in our financial system and economy.